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Engle, Robert F.; Ledoit, Olivier; Wolf, Michael - 2017

for conditional heteroskedasticity; a favored model is Dynamic Conditional Correlation (DCC), derived from the ARCH/GARCH …

Persistent link: https://www.econbiz.de/10011663190

Beyond sorting: A more powerful test for cross-sectional anomalies

Ledoit, Olivier; Wolf, Michael; Zhao, Zhao - 2016

Many researchers seek factors that predict the cross-section of stock returns. The standard methodology sorts stocks according to their factor scores into quantiles and forms a corresponding long-short portfolio. Such a course of action ignores any information on the covariance matrix of stock...

Persistent link: https://www.econbiz.de/10011663197

Bayesian predictive distributions of oil returns using mixed data sampling volatility models

Virbickaite, Audrone; Nguyen, Hoang; Tran, Minh-Ngoc - 2023

such as Generalized Autoregressive Conditional Heteroskedastic (GARCH), Generalized Autoregressive Score (GAS), and … inclusion of exogenous variables is beneficial for GARCH-type models while offering only a marginal improvement for GAS and SV …

Persistent link: https://www.econbiz.de/10014331159

Bayesian semiparametric multivariate GARCH modeling

Jensen, Mark J.; Maheu, John M. - 2012

This paper proposes a Bayesian nonparametric modeling approach for the return distribution in multivariate GARCH models …. An infinite mixture of multivariate normals is given a flexible Dirichlet process prior. The GARCH functional form enters … posterior simulation and computation of the predictive density. Bayes factors and density forecasts with comparisons to GARCH …

Persistent link: https://www.econbiz.de/10010292242

Estimating a semiparametric asymmetric stochastic volatility model with a dirichlet process mixture

Jensen, Mark J.; Maheu, John M. - 2012

In this paper, we extend the parametric, asymmetric, stochastic volatility model (ASV), where returns are correlated with volatility, by flexibly modeling the bivariate distribution of the return and volatility innovations nonparametrically. Its novelty is in modeling the joint, conditional,...

Persistent link: https://www.econbiz.de/10010292350

Jumps in option prices and their determinants: Real-time evidence from the E-mini S&P 500 option market

Kapetanios, George; Neumann, Michael; Skiadopoulos, George - 2014

We study the real-time characteristics and drivers of jumps in option prices. To this end, we employ high frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are uncorrelated with jumps in the...

Persistent link: https://www.econbiz.de/10011381002

The random walk of high frequency trading

Aldrich, Eric M.; Heckenbach, Indra; Laughlin, Gregory - 2015

This paper builds a model of high-frequency equity returns by separately modeling the dynamics of trade-time returns and trade arrivals. Our main contributions are threefold. First, we characterize the distributional behavior of high-frequency asset returns both in ordinary clock time and in...

Persistent link: https://www.econbiz.de/10011406341

Empirical evidence on the importance of aggregation, asymmetry, and jumps for volatility prediction

Duong, Diep; Swanson, Norman R. - 2013

Many recent modelling advances in finance topics ranging from the pricing of volatility-based derivative products to asset management are predicated on the importance of jumps, or discontinuous movements in asset returns. In light of this, a number of recent papers have addressed volatility...

Persistent link: https://www.econbiz.de/10010334248

Nonlinear shrinkage of the covariance matrix for portfolio selection: Markowitz meets Goldilocks

Ledoit, Olivier; Wolf, Michael - 2017

Markowitz (1952) portfolio selection requires an estimator of the covariance matrix of returns. To address this problem, we promote a nonlinear shrinkage estimator that is more flexible than previous linear shrinkage estimators and has just the right number of free parameters (that is, the...

Persistent link: https://www.econbiz.de/10011663163

Measuring agency costs and the value of investment opportunities of U.S. bank holding companies with stochastic frontier estimation

Hughes, Joseph P.; Mester, Loretta J.; Moon, Choon-Geol - 2016

By eliminating the influence of statistical noise, stochastic frontier techniques permit the estimation of the best-practice value of a firm´s investment opportunities and the magnitude of a firm´s systematic failure to achieve its best-practice market value - a gauge of the magnitude of...

Persistent link: https://www.econbiz.de/10011687921